Receiving Wide Coverage ...
Bank of America Found Liable: The verdict of a New York jury Wednesday holding Bank of America liable for alleged mortgage misdeeds at Countrywide may go down as an important turning point in the federal government's belated push for financial crisis accountability. The major papers list several reasons why this civil trial matters: it marks the first time a bank has been held liable for fraud in connection with the mortgage boom; the jury pinned some of the responsibility on an individual executive; the decision is likely to spur class-action lawsuits that could cost Bank of America billions of dollars more; and the victory is likely to embolden the government to bring more such fraud cases against banks.
In a sidebar, the Wall Street Journal notes that some in the banking industry believe government lawyers are misapplying a 1989 statute that was used in the Countrywide suit. The law is an attractive tool because it has a long statute of limitations, offers subpoena power to civil prosecutors, and has a burden of proof that is comparatively easy to establish. The banks' arguments are falling on deaf ears: three different federal judges have allowed the government's new application of the law.
JPMorgan Potpourri: The hits keep coming for JPMorgan Chase, despite its tentative $13 billion settlement with the federal government over mortgage practices. In a scoop, the New York Times reports that federal authorities are preparing to take action in a criminal investigation of Chase's role in Bernie Madoff's Ponzi scheme. The paper cites anonymous sources saying that Chase and prosecutors have held preliminary discussions about a deferred prosecution agreement, a tool whose use against major U.S. banks is "nearly unheard-of."
A Washington Post article explores the fairness of JPMorgan shareholders being put on the hook for the bank's hefty mortgage settlement, which largely involves securities produced by predecessor companies Bear Stearns and Washington Mutual.
ProPublica columnist Jesse Eisinger cites Goldman Sachs chief executive Lloyd Blankfein as an example for Chase CEO Jamie Dimon of how to weather a flurry of damage to your bank's reputation. "I hate to be the bearer of good news for Jamie Dimon," Eisinger writes, "but everything is going to work out O.K."
Lastly, it feels like piling on, but several of the papers note that former Countrywide executive Rebecca Mairone, who was held liable Wednesday in the aforementioned civil suit, currently works for you guessed it JPMorgan Chase.
A Continental Stress Test: Coverage of new stress tests of European banks details of which were announced Wednesday focuses on questions about the exercise's credibility. European Central Bank President warns that some banks need to fail, or the results won't be trusted. The Financial Times' Lex column frets that the process will again be seen as "an unconvincing fudge," while another FT piece asks whether the European assessment will live up to the "gold standard" for bank stress tests established by the United States in 2009.
The Journal takes a wider look at Europe's long-running financial troubles and concludes that momentum for a deeper political union, including a strong collective safety net for the continent's banks, is fizzling out.
Wall Street Journal
A new breed of high-end pawn shops is filling a void for small business owners that either can't get a bank loan, or don't want to go through the hassle of getting one. (See here for earlier American Banker coverage of the trend.)
New homes in the United States are being built for wealthier buyers than they used to be a shift that the Journal chalks up to stricter mortgage qualification standards for lower-end purchasers as well as stronger income growth at the top of the wage chart.
When details of Chase's tentative mortgage settlement began to leak, news reports stated that the deal would likely serve as a blueprint for settlements with other banks. Now the FT reports that the task force that reached the Chase agreement is investigating the sales of mortgage-backed securities by nine other banks: "Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Royal Bank of Scotland, UBS and Wells Fargo."
A House bill sponsored by Democratic Reps. Maxine Waters and Carolyn Maloney would allow regulators to hold bank executives personally liable for violations of anti-money laundering laws.
New York Times
British peer-to-peer small business lender Funding Circle has raised $37 million to expand in the United States.
Three in five Americans with 401(k)-type retirement accounts are accumulating debt faster than they are saving, according to an eye-opening report from the financial advice firm HelloWallet. "We raised the victory flag as people increased retirement contributions," says the company's chief executive, Matt Fellowes, "but in reality the ability of people to retire is a function of lots of different variables, most important of which is what they are doing on the other side of the ledger."